Modest Upward Trend For Cocoa

COCOA

The cocoa market is on a modest upward trend as it waits for the 2024/25 main crop to come in. Ivory Coast growers expect harvest to begin next month, and the amount of rain the crop receives will determine the amount and duration of the harvest. Ideal conditions are a mixture of rains and sunshine. December Cocoa was slightly lower overnight after backing off from a rally yesterday that took it to its highest level since mid-June. The market has found support this month from concerns over dry conditions in west Africa, especially in Ghana, that have lowered expectations for the main crop. World Weather Service reported yesterday that satellite imagery suggested cocoa areas in much of Ivory Coast received moderate to heavy rain on Monday, while much of Ghana received light to moderate rain. The bias for rainfall for the region still looks to be in northern cocoa areas through the coming week, although a few showers of limited significance will occur in the south. Areas nearest to the coast will be driest. Producers would like to see a more rainfall in the south, but that may take another week, which could leave southern regions stressed. Southern Ivory Coast and southwestern Ghana did receive light rainfall of up to 5 mm over the past 24 hours.

COFFEE

December NY Coffee was lower overnight after trading to new contract highs yesterday, with the nearby contract reaching its highest level since October 2011. London (robusta) futures also reached new highs yesterday. The focus remains on very tight supplies of robusta coffee, as has been the case for most of the year. Traders are saying that farmers in Vietnam and Indonesia are holding back what coffee they have in stock, expecting prices to rise further. Vietnam’s harvest usually begins in October. Brazil is in its dry season, but conditions have been exceptionally dry this year, which raises concerns about their 2025 crop which begins blooming next month. Their 2024 harvest is just about complete. World Weather Service says there is very little opportunity for rain away from the coast for a while.  No rainfall was reported in the last 24 hours. Much of the Central Highlands of Vietnam received light to moderate rain this week, and with regular rounds of showers and thunderstorms expected through the next week, conditions for coffee should remain favorable. ICE arabica stocks fell 5,275 bags yesterday to 838,450 after reaching their highest level in at least four months on Friday. The amount pending review jumped by 18,081 to 46,595, the highest since August 12.

COTTON

December Cotton was lower for the third straight session overnight, as it continued to back off from Monday’s five week high. The market saw a seven-session rally off contract lows on declining US crop conditions and improved demand outlook in anticipation of a US interest rate cut, but despite those positive developments, the world is still expected to see ample supply this year, and there are nagging concerns about Chinese demand that have limited the rally. Yesterday China came out with an angry response to the US sanctions on Chinese entities which have supported Russia in its war against Ukraine. China called the sanctions “illegal and unilateral” and “not based on facts,” in a statemen issued ahead of White House National Security Jake Sullivan’s arrival in Beijing for days of high-level talks. Dryness is a concern for the west Texas and the Delta. Eastern and southern Texas saw rain over the past 24 hours, but none was reported for west Texas, the Panhandle, or the Delta. Flooding in Bangladesh, India, and China’s northern plains could affect cotton areas.

SUGAR

October Sugar was slightly lower overnight after extending its rally yesterday to its highest level since July 16. The market is awaiting the UNICA Brazil update on first-half August sugar production, which is expected to be released this week, and the trade is expecting to see production to come in below year ago levels due to the dry conditions this year. A survey by S&P Global Commodities Insights has average expectations for first-half August Center-South sugar production at 3.28 million metric tons, which would be down from 3.61 million in the second half of July and 3.464 million a year ago. As of August 1, cumulative sugar production for 2024/25 was running 8% above a year ago. Dryness concerns were driven home this week by reports of fires in cane growing regions, which spread quickly due to the drought, but the fires were set deliberately. The suspects are believed to be linked to organized crime and who were retaliating against anti-crime actions of the government, specifically measures enacted to combat the criminal trade in adulterated biofuels. There were more than 2100 fires reported in sugarcane fields, resulting in the burning of 59,000 hectares of sugarcane areas and crop regrowth areas.

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